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Imagine that when we started Apple we set things up so that we could
charge purchasers of our computers by the number of bits they use. The
personal computer revolution would have been delayed a decade or more. If
I had to pay for each bit I used on my 6502 microprocessor, I would not
have been able to build my own computers anyway.

He also details examples of how difficult it was to start a new service
the way the telephone system used to be,
how radio used to all be freely receivable,
and how cable TV is mis-regulated.
He summarizes his case:

I frequently speak to different types of audiences all over the
country. When I’m asked my feeling on Net Neutrality I tell the open
truth. When I was first asked to “sign on” with some good people
interested in Net Neutrality my initial thought was that the economic
system works better with tiered pricing for various customers. On the
other hand, I’m a founder of the EFF and I care a lot about individuals
and their own importance. Finally, the thought hit me that every time
and in every way that the telecommunications careers have had power or
control, we the people wind up getting screwed. Every audience that I
speak this statement and phrase to bursts into applause.

Then he asks for all that not to happen to the Internet:

We have very few government agencies that the populace views as looking
out for them, the people. The FCC is one of these agencies that is still
wearing a white hat. Not only is current action on Net Neutrality one
of the most important times ever for the FCC, it’s probably the most
momentous and watched action of any government agency in memorable times
in terms of setting our perception of whether the government represents
the wealthy powers or the average citizen, of whether the government is
good or is bad. This decision is important far beyond the domain of the
FCC itself.

Andrew Odlyzko asks what if the duopoly gets its way and completely
does away with net neutrality:

But what if they do get their wish, net neutrality is consigned to the
dustbin, and they do build their new services, but nobody uses them? If
the networks that are built are the ones that are publicly discussed,
that is a likely prospect. What service providers publicly promise to
do, if they are given complete control of their networks, is to build
special facilities for streaming movies. But there are two fatal defects
to that promise. One is that movies are unlikely to offer all that much
revenue. The other is that delivering movies in real-time streaming mode
is the wrong solution, expensive and unnecessary. If service providers
are to derive significant revenues and profits by exploiting freedom
from net neutrality limitations, they will need to engage in much more
intrusive control of traffic than just provision of special channels
for streaming movies.

But video, and more generally content (defined as material prepared by
professionals for wide distribution, such as movies, music, newscasts,
and so on), is not king, and has never been king. While content has
frequently dominated in terms of volume of traffic, connectivity has
almost universally been valued much more highly and brought much higher
revenues. Movies cannot be counted on to bring in anywhere near as much
in revenues as voice services do today.

The Internet isn't about Sarnoff's Law (broadcast content like TV, radio, and newspapers)
or even about Metcalfe's Law (1-n connectivity, like telephone or VoIP):
it's about Reed's law,
2n-n connectivity, such as blogs, P2P, and facebook).
That's my interpretation;
Odlyzko probably wouldn't agree.

Anyway, that video content such as movies is king is one of the primary
delusions Odlyzko addresses in this paper.
The other is that movies need to be streamed in realtime.
It is mysterious why people continue to believe that in the face of the massive
evidence BitTorrent and other P2P services that deliver big content
in chunks faster than realtime.
I can only attribute this second delusion
to a bellhead mindset that still thinks in
terms of telephone, which was realtime because nobody knew any other
way to do it back in the analog-copper-wire-connection day.

As Odlyzko sums it up:

The general conclusion is that the story presented by service providers,
that they need to block net neutrality in order to be able to afford
to construct special features in their networks for streaming movies,
is simply not credible. If lack of net neutrality requirements is to be
exploited, it will have to be done through other, much more intrusive
means.

So why let the duopoly force a policy on everyone else that won't even work
to the advantage of the duopoly?

One way to get net neutrality would be to let the duopoly have its way,
and wait for it to implode.
However, given that for streaming video to have any chance of succeeding,
the duopoly would have to clamp down on everything else to eliminate
any competition, I shudder to think what this would mean.
The Internet as a source of real news and opinion would go away.
Given that the vestigial traditional news media in the U.S.
(TV, radio, newspapers) provide so little news, there's a very
good chance that most people in the U.S. wouldn't even know
how bad they had it as the country sped its slide into parochialism
and irrelevance.
How many people even know now that the U.S. has slid from #1 to #23
or whatever the latest number is in broadband uptake?
If the duopoly is given its head, even fewer would know.

If we let King Kong Telco and T Rex Cableco battle it out to be
Movie King of the Internet, where does that leave poor Fay Wray Public?

FCC, FTC, Congress, executive, and courts, not to mention the public,
should all read Odlyzko's
paper, and should all refuse the duopoly's demand for special
privileges that won't even produce profits for the duopoly.
Then all of above should legislate, enforce, and maintain
net neutrality so we will all profit and benefit.
Yes, even the duopoly can win with this.

The eager and almost rabid application of Porter’s “Five Forces” (Supplier
Power, Customer Power, Threat of New Entrants, Threat of Substitute
Products, Industry Rivalry) to technology products and services has
bred an entire generation of MBAs in marketing positions dedicated to
developing and maintaining closed systems and closed hardware platforms.
This is particularly egregious in the case of business models that are
effectively based on distribution channels. In conventional analysis
there is nothing wrong with making your living on distribution channels.
Remember, that in 1979, when Porter developed the Five Forces framework,
distribution channels were highly expensive to create and maintain
and, owing to these costs, constructing them effectively presented
a significant barrier to entry. Your product didn’t even have to be
particularly good, because the threat of substitutes was reduced via
the difficulty and expense of the competition actually getting those
substitutes (however good they might be) to your customers. Suppliers,
if they wanted access to your customer base as a proxy to sell their raw
materials, had to go through you. New entrants had to build an entirely
new distribution channel. Customers were stuck. You owned the market.
But you had to guard this distribution channel carefully. And you
had to make sure you hadn’t forgotten something simple and critical.
That’s not part of a conventional Porter analysis. But why would it be?
Conventional distribution channels are quite physical, antique and boring.

David P. Reed asks a question and Christopher S. Yoo responds
on Farber’s Interesting People list.
I’m posting both in full here,
with my thoughts at the end;
basically, law isn’t a science, and anecdotes can turn into
legal cases; some have already regarding net neutrality.

From: David P. Reed [dpreed@reed.com]
Sent: Saturday, May 10, 2008 11:50 AM
To: David Farber
Cc: ip
Subject: Re: [IP] re-distribution of op-ed on Net Neutrality — a reaction and a reply from one of the authors

I read through the long comment by Chris Yoo below, and as a non-lawyer
interested in policy, I ask the following simple question:

Is there a well-regarded (one might ask for scientifically reasoned)
argument that antitrust law as currently interpreted and practiced has a
substantial impact measured in some currency like $ on social welfare?

Otherwise this entire argument is about nothing more than vaporware
proceeding from a faith that competition (however loosely defined)
creates social welfare best. AFAIK, this is largely an article of
faith, just as the “End of History” was a grand article of faith posited
by many of the same people as “truth”.

It is just not fair to imply that the core of “today’s settled antitrust
law” carries even the level of weight as Darwin’s Theory of Evolution.
There have been no replicable studies of its practice.

Law professors and lawyers who don’t challenge its truthiness squarely
are merely behaving as dogmatic mandarins always do – asserting
authority of professional status, rather than rigor of reasoning,
experiment, or argument.

I say this not as FOX News or Hillary Clinton would call an elitist, but
as a person who genuinely is unconvinced by magical faith in
authorities.

Comcast, AT&T, Time Warner Cable, and cable research company CableLabs were all invited to participate several weeks ago, but declined, Martin said. The commission again reached out to Comcast after the announcement this week that it would develop a P2P bill of rights with Pando Networks, but they again sent their regrets, he said.

The online behavior of a small but growing number of computer users in the United States is monitored by their Internet service providers, who have access to every click and keystroke that comes down the line.

In Canada, an ISP has even gotten up to blocking striking employees’ website:

During the Telus strike in 2005, the corporation blocked access to a website run by striking Telus employees called “Voices for Change” (and at least 766 other websites). Those familiar with network-control issues in Canada also accuse Rogers and Bell of limiting peer-to-peer (P2P) applications, which people use to share audio, video and other digital data with one another. So, here we have ISPs blocking or at least limiting the use of what is likely the most innovative, creative and participatory use of the Internet. In response to customer concerns, Bell recently admitted that they “are now using Internet Traffic Management to restrict accounts that are using a large portion of bandwidth during peak hours. Some of the applications that are included are the following: BitTorrent, Gnutella, LimeWire, Kazaa….”

Everybody’s familiar with consumer identity privacy, as in protecting passwords
and social security numbers and complying with HIPAA, GLBA, SOX, PIPEDA,
et al.
But what about packet privacy?

Never mind net neutrality, I want my privacy. As in packet privacy. The
telcos say they need to sell non-neutral routing of traffic to recover
the cost of building broadband networks. Moving from the Internet,
where a packet-is-a-packet, to something that looks suspiciously like
the 20th century telephone network requires remarrying the content and
connectivity that TCP/IP divorced. It requires deep packet inspection. It
requires looking at the content of communication.

AT&tT does not plan to roll out two physical pipes to every end point
in order to sell Google enhanced access. The new telco plan calls for
content-based routing to separate traffic into media and destination
specific VPNs (Virtual Private Networks). Laws exist to address the
substantial privacy threats created by the fact telephone companies
know Mr. Smith called Mr. Jones, but the privacy risks associated
with “content routing” replacing “end point routing” enter an
different realm.

Despite Berninger’s phrasing, packet privacy isn’t something separate from
net neutrality: it’s one of the key features of it.
The point is that net neutrality isn’t just about pricing policies
or technical means of content routing: it’s about privacy.
And privacy is an issue that everybody understands.
Stifling, throttling, or disconnecting without announced limits, censoring, wiretapping, and espionage:
these are all violations of packet privacy.

AT&T’s CEO Randall Stephenson announced next year’s 3G iPhone a few weeks before
this year’s iPhone’s likely biggest sales over the holidays:

So what’s up? Was it a simple slip? Or is the guy so out of touch with
reality that he doesn’t realize that with a few words he has probably
deferred — maybe forever — at least a million new customers worth to
Wall Street at least $1 billion in market cap for his company?

I don’t think Stephenson’s statement was by accident and I don’t think
he is out of touch with reality. I think, instead, he was sending a $1
billion message to Apple CEO Steve Jobs.

Well, it could be either.
This is the same AT&T that couldn’t produce its own iPhone and
had to make a deal with Apple; AT&T could be so out of touch
that it doesn’t know what it’s doing in this announcement.
And maybe Stephenson resents that so much that he does want to
hurt Apple even if it hurts AT&T.
If he thinks he can get away with it, it amounts to the same as being
out of touch, because Apple could produce an unlocked iPhone and sell
it on all AT&T’s networks, especially if Stephenson gives Jobs
enough excuse to break Apple’s contract with AT&T.
Or, as Cringely points out, Apple could join Google in bidding for 700Mhz
spectrum, or enable its Apple computers for VoIP, or come up with something
else that isn’t covered by the existing contract.
Jobs and Apple know how to innovate.
Telcos don’t.
No wonder AT&T is scared.